Euro-Bond Sector
Lures Hedge Funds

LONDON -- Hedge funds and the proprietary trading desks of some investment banks are increasingly looking to inflation-linked euro-denominated bonds and their derivatives as they search for profits.

Many of the hedge funds' traditional strategies -- such as merger arbitrage and convertible arbitrage -- offer dwindling chances to make a profit because of a lack of deals and the number of funds now involved. The index-linked bond and...